• Service: Advisory, Risk Consulting
  • Industry: Global China Practice
  • Type: Audio
  • Date: 6/3/2011
  • Length: 9:09 Minutes


Edwin Fung


Sherry Hao


Podcast on China's 12th Five-Year Plan (2011-2015) 

This audio podcast features an interview with KPMG partners. They discuss the recently released China's 12th Five-Year Plan from different perspectives.


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Script for Podcast on China's 12th Five-Year Plan (2011-2015):

[VOICE OVER INTRO] China's 12th Five-Year Plan was ratified by the National People's Congress on the 14th of March 2011.This is a big ambitious document setting out a range of high level economic and social targets. Yet in this huge country with so many complex markets, what can businesses really take from this document…and how should it affect their planning? Edwin Fung, Global Chair of KPMG's Global China practice, based in Beijing, explains more.
EDWIN FUNG With average GDP growth of over nine percent for the past ten years, China recently overtook Japan as the world's second biggest economy. China is an important market for business, not just for the both domestic companies in China, but also for multinational companies around the world. As compared to the 10th and 11th Five-Year plans which were focused on driving and maintaining strong economic development, China's 12th Five-Year plan is more focused on quality of growth, not the quantitative growth. As I was reading through the plan, I found certain key themes and words, keep coming through; sustainable growth, scientific development, moving up the value chain, reducing wealth disparities. All these will have implication for all kinds of sectors - construction, automotives, chemicals, aerospace, the list goes on. China's 12th Five-Year plan was important milestone for the next five years, not just for China, but also for your business. It could have strong and long-term implications for the way you manage your people, your business, the location that you are operating in, and the decision you make in terms of investment for the future.

I think each business operating in China can really think how it is affected by these themes. By understanding the Five-Year Plan, you have an opportunity to demonstrate your deep commitment to China, and show that you are making positive contribution to the China's long-term development. Being the executive on your organisation, you should consider how you can make reference to the Five-Year Plan in your marketing, PR, dialogue with officials, your communications to your own staff, and more importantly in your strategic planning for the next five years.
[VOICE OVER] The Five-Year Plan sets firm targets for sustainable growth and development of clean energy. Leah Jin is a partner in KPMG Shanghai office, who advises clients on a range of sustainability strategies. What does she think will be the most significant targets set out in the new Plan?
LEAH JIN The Five-Year Plan sets out some very ambitious targets. These include increasing non-fossil fuel use to 11.4% of total energy consumption; Reducing average energy use per unit of GDP by 16% and reducing CO2 emissions per unit of GDP by 17%. How achievable are these targets? Well, in the last Five-Year Plan China actually did quite well, for example, It hit its targets for water usage and for reduction of energy use per unit of GDP, China achieved 19.1% against a target of 20%. Many believe that most quick fixes to improve energy efficiency and carbon efficiency have been undertaken. The road to achieving the ambitious targets set for the current Five-Year plan is much steeper now. China is looking for innovative ways to face this challenge. The most noticeable are restructuring the country's energy mix, carbon pricing and promoting sustainable development.

China has relied heavily on coal for power generation and will continue to do so in the foreseeable future. In addition to enhancing the carbon efficiency of coal firing power plants, China is putting an increasing emphasis on the development of clean and renewable energy that includes hydro, nuclear, wind, solar and bio mess.

Power transmission and distribution is also getting a boost from the development of smart grid technology which is currently in experimental stage. As more and more countries around the world implement ways to put a price on carbon emissions, China is experimenting a market mechanism for carbon pricing as well. Companies, especially those with high emissions should take a serious look at their carbon foot print now and put a plan in place to reduce carbon emissions in order to mitigate risks brought on by the new regulations and more importantly take the early mover advantage to gain the competitive edge.

All in all it is about sustainable development and value creation. There has never been an opportunity like this for businesses to create economic value while reducing their impact on the environment.
[VOICE OVER] Sherry Hao is a partner dealing with some of KPMG's largest clients across a range of industrial sectors in China. Who does she think will be the winners and losers over the years ahead?
SHERRY HAO The Five-Year Plan sets out the seven priority industries with the pledges of up to 4 trillion RMB - that's about 600 billion US dollars - to areas such as IT, environmental protection and the scientific research.

I expect that may translate into specific support for high end equipment manufacturing in sectors such as aerospace, communications, clean tech and the medical equipment. We may see the business environment becoming more amenable to companies operating in those sectors. There could be certain tax incentives or other favourable policies, although the plan also notes the need to ensure foreign acquisitions will be subject to security reviews. On the other side of the coin, this supports some of the social objectives we see in the Plan. It highlights the importance of raising people's livelihood and meeting peoples' aspirations in terms of health and the lifestyle. The Plan aims to raise the minimum wage levels substantially and steadily over the next five years.
[VOICE OVER] How does Sherry see these changes affecting China's huge manufacturing sector?
SHERRY HAO As a long term trend, I think the low-end manufacturers may come under pressure to relocate or upgrade, while industries facing overcapacity issues may be candidates for consolidation.
[VOICE OVER] Turning back to Edwin Fung, what does he expect to happen now the Plan has been approved?
EDWIN FUNG Compared to previous plans, this time around we see a greater focus on a couple of areas, one is driving engine for economic development will shift from export to domestic consumption, from investment to consumption, and also more emphasize on social targets instead of economic targets. For example there are some ambitious targets for development of social housing. These changes could entail more opportunities and implementation challenges at the local level, which businesses operating in that particular location need to be fully aware of. As a next step in the process, different ministries are working on formulating rules and regulations to facilitate the operation of the Five-Year plan and also its province who roll out their own local plan. So over the next three to six months, we expect more details of the implementation measures will be issued. Over time, when implications in specific regions and industry sectors become clear, companies should start to evaluate direct impacts on operations, costs and future business opportunities.
[VOICE OVER] KPMG is committed to helping its clients both within China and globally in navigating the complexities of China and helping them understand the implications of the Twelfth Five-Year Plan. For more information about KPMG and to read more of our analysis, visit


The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.


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